General insurers have started offering deep discounts to corporate clients in the wake of drop in the motor insurance and fall in new industrial projects, say industry officials. “There are instances where the industry has started offering deep discounts to corporate clients as no new projects arecoming up. On the back of a shrinking pie, companies are offering discountseven for operational projects,” said an official from a large state-run general insurance firm. Discounts on offer range up to 95 per cent in some cases, he said, adding that this kind of rate is not sustainable in the long-run. An official from a private insurance firm said discounts offered in the recent time are due to the dip in motor insurance business, following the falling sales in the auto sector. “The motor insurance segment has slowed due to the fall in auto sales. This has prompted some insurance players to offer discounts in other lines of business like commercial insurance segment,” managing director and chief executive at Bharti Axa General Insurance Amarnath Ananthanarayanan said, adding offering of discounts has started in the last one month. He also said these offers are not sustainable in the long-run and his company is not offering such deep discounts to clients. Due to the general slowdown, growth of general insurance industry has come down to around 12 per cent in recent months from an average of around 18 per cent seen last fiscal.
This was mainly due to dip in the motor insurance business, which constitutes around 45 per cent of the total business.
Also, commercial business has also seen slowdown due to lack of new projects, creating fear of an overall low growth for the industry in the current fiscal. However, some industry officials differ in their views towards the discounts offered by general insurers. “I think, after the Detariffing in 2007, competition has pushed the premium down in some lines of business. So, one can’t infer that if some discounts are offered, they are the direct result of the slowdown in some segments of general insurance industry,” General Insurance Council secretary general R Chandrasekaran said.
Source: The Economic Times
Date: 21st August 2013